Is Apple Pricing Aggressively to Dominate the Tablet Market?

With Lenovo's LePad tablet now on sale in China, the tablet-war watchers add another piece to the pricing puzzle. But this one may make them ask whether Apple (Nasdaq: AAPL  ) , known for its ability to command premium prices, is using a different strategy for its iPad tablets.  

It's not that Apple didn’t tell anyone
On Apple's earnings call last October, CEO Steve Jobs stated: "We're all about making the best products at aggressive prices, and that's what we will do. That's what we've done with the iPod and that's what we will do with the iPad as well." It should have been hard to miss that comment about aggressive prices: It's out of character for Apple, and Jobs was responding to analyst concerns about a sequential drop in gross margin that quarter, from 39.1% to 36.9%. 

Of course, last October there weren't iPad competitors that could we could use for comparison-shopping. Now there are.

Lenovo's LePad is one of them, and it's priced above the most comparable Apple iPad 2. The LePad is priced in yuan, and the price points are clearly chosen to end with the ever popular "99."

Tablet

Screen Size

16GB Wi-Fi

16GB Wi-Fi + 3G

32GB Wi-Fi

32GB Wi-Fi + 3G

Apple iPad 2

9.7”

$499

$629

$599

$729

Lenovo LePad

10.1”

3,499 yuan ($533)

4,599 yuan ($701)

Not Available

Not Available

Motorola Mobility (NYSE: MMI  ) Xoom

10.1”

Not Available

Not Available

$599

$799

Hewlett-Packard (NYSE: HPQ  ) TouchPad

9.7”

Not Yet Known

Not Yet Known

Not Yet Known

Not Yet Known

Sources: Apple.com, BestBuy.com, PCworld.com, WSJ.com.

Motorola Mobility was ridiculed for pricing its Xoom above the most comparable iPad. Notably, pricing on Motorola's Wi-Fi-only version subsequently came in at the same price as the most comparable iPad.

HP has not yet announced pricing on its upcoming TouchPad tablet, due out this summer. According to news articles, a leaked document indicates that HP plans to match iPad 2 pricing, including an entry-level model at $499.

Although Samsung, Dell (Nasdaq: DELL  ) and Research In Motion (Nasdaq: RIMM  ) offer lower-priced tablets, their screen sizes are 7 inches instead of roughly 10. In tablets, size matters.    

 

Screen Size

16GB Wi-Fi

16GB Wi-Fi + 3G

32GB Wi-Fi

32GB Wi-Fi + 3G

Samsung Galaxy Tab

7”

NA

$499.99

NA

 NA

Dell Streak 7

7”

NA

$449.99

NA

NA

RIM PlayBook*

7”

$499.99

TBA

$599.99

TBA

*Available on April 19 in the United States and Canada.

Foolish takeaway
We'll get more data points when Lenovo's LePad goes on sale outside China in June and when HP officially announces TouchPad pricing.

In the meantime, Steve Jobs' comments about aggressive pricing on the iPad, combined with competitors' apparent inability to undercut iPad pricing, suggest that Apple may be using aggressive prices to dominate the tablet market in the same way its iPods dominate the MP3 market. If it succeeds, the strategy could drive stellar earnings growth at Apple for many years to come. 

To keep up to date on the rapidly growing tablet market, add any of the companies mentioned in this story to our free watchlist service!

Fool contributor Cindy Johnson currently owns no shares of any of the companies in this story. Motley Fool Options has recommended a bull call spread position on Apple. The Fool has written puts on Apple and owns shares of Apple, which is also a Motley Fool Stock Advisor pick. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (7) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 03, 2011, at 11:56 AM, foolpost11 wrote:

    At Best Buys, Xoom $599, Ipad2 $729, both with 32GB and Wifi. Ipad2 16GB $499.

    Note, Xoom comes with additional 32GB SD storage.

    Xoom 32GB WiFi, $599 no tax & free shipping, is the bestseller tablet at Amazon; Ipad2 16GB Wifi sells for $620.

    Here is the link:

    http://www.amazon.com/gp/bestsellers/electronics/1232597011/...

  • Report this Comment On April 03, 2011, at 12:27 PM, foolpost11 wrote:

    To add on CURLYHEAD46:

    The out-the-door price and add up easily with Ipad2.

    Ipad2 does NOT have slot for SD storage, so with Xoom, if you have lots of files/images you can always swap the SD card.

    Xoom has HDMI 1.4, which supports HD, 100Mb Ethernet, and audio return. Newer TV has 1.4 to connect to soundbar with only one HDMI cable instead of having an additional audio cable connected.

    http://www.hdmi.org/manufacturer/hdmi_1_4/hdmi_1_4_faq.aspx

    Ipad2 HDMI (Not 1.4) adapter cost $39

  • Report this Comment On April 03, 2011, at 1:44 PM, jameskatt wrote:

    The Xoom is dead on arrival. Period.

    The user experience of the Xoom is completely poor compared to that of the iPad.

    Despite its specs, it is even slower than the IPad.

  • Report this Comment On April 03, 2011, at 1:54 PM, FutureMonkey wrote:

    Whats a Xoom?

    ...TIC to make the point that apparently marketing does matter.

  • Report this Comment On April 03, 2011, at 3:02 PM, ConstableOdo wrote:

    Motorola Mobility's share price is tanking. Buy a Xoom and you might be buying into a bankrupt company by the end of the year. Xoom and Droid sales are abysmal. The tablet and smartphone business is too difficult for a small player such as Motorola to be successful in. Apple has likely sold more iPad 2s in a week than Motorola will sell for the rest of the year.

    Almost no consumers care about buying Android Honeycomb tablets that run on what is basically an untested beta OS. Google is withholding Honeycomb source code because even they agree Honeycomb is a rushed trainwreck in progress. Xoom will no longer be the Honeycomb reference model tablet because Google was dissatisfied with it. No consumer in their right mind would ever purchase a Xoom tablet.

  • Report this Comment On April 03, 2011, at 5:12 PM, DefunctAcct wrote:

    A lot of Motorola Marketeers all over the web trying to drum up public awareness of XOOM and hopefully brand recognition.

    Some facts:

    1. XOOM is the only tablet on sale on Amazon. Being number one when it is the only one is meaningless.

    2. What software does XOOM have to match garage band, iMovie, Pages, Numbers and iPhoto?

    3. Does XOOM integrate naturally and easily with Mac's so that a person using a Mac can easily use a XOOM as a supplemental tool?

    4. How many people actually carries a 7-inch tablet as a camera? Lifting it to film an event?

    5. SD Card extension is nice but pale in importance when compared against other considerations. Some people need this, some people do not care.

    6. 4G upgrade is really nice but by the time 4G is ready, 4G-capable iPad 3 will not be far behind. Yet another feature that pales in importance when compared against other considerations. People do not buy a device just because it runs 4G.

    7. Resolution? In a 7-inch versus 9-inch screen? With XOOM using the much slower Tegra 2 GPU when compared against Imagination Technologies' powerful MP2's? No comparison!

    8. Dual speakers? That is soooo important? May be we need to ask the frequency range, impedance, power curve, sensitivity and audiophile review? LOL. Yet another feature that is insignificant when compared against other more important considerations.

    I guess when one has little meaningful features to proclaim, every little bit helps, like have two speakers LOL.

    XOOM will do just fine in attracting buyers who prefer Android. There is no need for such silly and amateurish and ineffective online Marketeering fiascos.

  • Report this Comment On April 03, 2011, at 11:23 PM, 34f343 wrote:

    Every Xoom defender is just talking about the hardware when the software experience is the differentiating factor these days.

    No I don't mean "software" I mean the experience of using the software. Face it, most consumers just want to use the device, no training, no technical ability, just pick it up and go. Specs are meaningless if its a pain to use.

    As someone has already said, HDMI, SD Cards and 4G are nice but not necessary or even important to most users.

    The post-PC era will be very different from the PC era.

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